Malaysia Airports Holdings Berhad. - Encouraging Load Factor for the Start of the Year

INVESTMENT HIGHLIGHTS

Total passenger movements (including ISGA) for MAHB advanced +3.1%yoy in January 2019

Yearly growth for domestic passenger traffic increased for the third month in a row

International passenger traffic was little changed but load factor remained commendable at 76.0%

Maintain BUY unchanged TP of RM9.88 per share

Passenger traffic growth in January 2019 above the norm. The January 2019 passenger traffic for MAHB airports (excluding ISGA) grew by +3.2%yoy to 8.4m passengers. For ISGA, its robust international passenger growth of +15.4%yoy for the same month outweighed the - 3.2%yoy decline in domestic passengers. This brings ISGA’s overall passenger growth in January 2019 to +2.6%yoy after hitting 2.8m passengers. As such MAHB’s total passenger traffic (including ISGA) grew by +3.1%yoy in January 2019, marking its 8th consecutive month of yearon-year (y-o-y) growth. In fact, the growth registered was above the norm as January is generally a low travelling month.

Domestic traffic continues its upward trend. Domestic traffic for Malaysia in January 2019 increased by +7.1%yoy to 3.9m passengers, extending the y-o-y growth to its third month. This is in contrast to the - 6.0%yoy drop seen in January 2018. The bulk of the growth was attributable to the +8.2%yoy jump in domestic traffic at airports ex-KLIA. We opine that the Thaipusam holiday falling on Monday could have been one of the underpinning growth factors.

International traffic was little changed.Meanwhile, international passenger traffic in Malaysia was little changed, advancing by less than +0.5%yoy. The commencement of new flights in 4Q18 such as Indian low-cost airline, Indigo Airlines and German leisure airline, Condor Airlines to KLIA2 and KLIA Main Terminal respectively carried the growth momentum into January 2019. This helped to mitigate the impact of the cut in international frequencies and temporary suspension of operation by Firefly and Indonesia AirAsia X. Overall, load factor for international passengers remain commendable at 76.0% in January 2019, +0.4ppts higher than a year ago.

Visa relaxation to sustain passenger growth.The extension of the visa relaxation for Chinese passengers until end of this year should sustain the passenger growth. Other growth factors would include direct connectivity seen from international airlines flying straight to locations such as Langkawi which will benefit MAHB. We strongly believe that MAHB passenger numbers can surpass the 100m mark in 2019, while maintaining a relatively conservative growth rate of +3.5%yoy. All things considered, we reiterate our BUY call on MAHB with a TP of RM9.88 per share as it is a proxy to Malaysia’s inbound/outbound travel industry, being Malaysia’s largest airport operator.